Gold has an amazing store of value that makes it an ideal investment option for Pakistani investors. In addition to that, it also helps them to counter the negative effects of inflation, political uncertainty and recessions. Moreover, it also has the potential of protecting them against rupee depreciation and stock market volatility. Therefore, experts believe that local investors should invest in this option and earn handsome bucks by taking advantage of fluctuations in the 1 tola gold price in Pakistan.Experts believe that numerous factors affect the local and international bullion market. If you are researching about them, then keep reading as we will explore things affecting 1 tola gold price in Pakistan this week.
Gold Market Performance last week
The 1 tola gold price in Pakistan (24K) started the week at Rs 219000 and ended the week at Rs 217000.
1.International gold demand and Supply
Gold prices increased slightly at the start of the current week recovering from twelve-week lows. The increase the prices was due to the investors reevaluating their expectations related to the upcoming monetary policy, as they are expecting a more aggressive approach from the U.S. central bank.
Currently, the spot price of gold, denoted as XAU/USD, is trading around the $1,923 per ounce range. It is only a few dollars above its opening price and has retreated from a daily high of $1,933.
Last week, the shift in expectations surrounding the Fed’s actions created downward pressure on the price of gold. The XAU/USD price reached $1,912 which is its lowest point since March 2023.
Federal Open Market Committee (FOMC) made a decision against its usual policy of raising interest rates after executing ten successive hikes. However, the dot plot revealed that committee members now anticipate two additional rate hikes later this year. This contradicted expectations that the Fed might adopt a more dovish stance and potentially consider one or two rate cuts.
As the new week begins, gold has recovered slightly from its recent lows in a risk-averse market environment. However, its price is fluctuating due to the US dollar dynamics. Moreover, the focus has now shifted towards the US Personal Consumption Expenditure (PCE) price index data, which measures national inflation. Experts are anticipating a high inflation rate. Therefore, it is expected that international precious metals prices and 1 tola gold price in Pakistan would rise further this week.
2. Rising USD to PKR exchange rate
Forex experts are anticipating a further depreciation in the Pakistani rupee value in the upcoming weeks. They are attributing this great fall to the ongoing political uncertainty and miserable economic performance of the last fifteen months. The current forex reserves are below $ 3.5 billion less than one month’s worth of imports. This situation is concerning and will exert additional strain on the already declining currency.
The USD/PKR exchange rate started the week at Rs 287.50 and ended the week at Rs 286.50. It is a good time for the gold investors for getting a good profit percentage as 1 tola gold price in Pakistan will rise due to rupee appreciation.
3.High Inflation and Interest Rates in Pakistan
The central bank of Pakistan has decided to increase interest rates by 100 basis points to reach a new record high of 22%. The central bank management stated that this decision was made due to the upcoming dangers of high inflation. The committee also emphasized that the increased taxes, duties, and petroleum development levy in the 2023-24 budget, as well as the relaxation of import restrictions, will further increase inflation and put additional pressure on the forex market.
According to the experts, these actions were necessary to aid the revival efforts of the $6.5 billion International Monetary Fund bailout package. The state bank committee also told the media that the main aim of increasing interest rates is to reduce inflation to the target range of 5% to 7% by the year 2025. Pakistan is currently facing a serious balance of payment crisis and a high inflation rate reaching 38% in May 2023 along with low foreign currency reserves.
Here, gold experts believe that high inflation and interest rates will encourage investors to put money in the bullion market and that will push the 1 tola gold price in Pakistan upwards.
4.Bad Performing Pakistani Economy and Politicians
The ongoing political and economic chaos has the potential of causing an economic default along with wide-ranging consequences such as a tense relationship with India and its economic relationship with China.
The current political turmoil also carries a serious threat to the PML-N-led government. Simultaneously, years of economic mismanagement are now taking their toll. Moreover, the country is also facing difficulties to repay loans utilized to finance budget shortfalls and corrupt projects. Experts are now quite sure that Pakistan might default on its external debts amounting to $126 billion. Therefore, we can say that the political uncertainty caused by the confusing political and economic strategy of the PML-N led government will further increase the 1 tola gold price in Pakistan.
What to do?
Gold can offer stability and retain its value during times of economic uncertainty. It typically exhibits an opposite trend compared to traditional assets such as stocks and bonds. Therefore, when the market faces challenges, the 1 tola gold price in Pakistan often rises. Therefore, investors can easily take advantage of these price appreciations to earn substantial profits.
In addition, gold serves as a beneficial tool for diversifying your investment portfolio and spreading risk across various asset classes. Similar to an insurance policy, if your stock market investments decline significantly, having gold that maintains its value or even appreciates can help minimize or offset your losses.
Nevertheless, it is crucial for investors to also monitor global factors, particularly the improving state of the U.S. economy, as it directly impacts the price of 1 tola gold in PKR.